Nov. 7 (Bloomberg) -- Brookfield Asset Management Inc.
plans to invest in South American wind farms and hydroelectric
plants to benefit from a burgeoning middle class after raising
$7 billion in the world’s second-biggest infrastructure fund.

Canada’s biggest manager of alternative assets completed
fundraising last week for its closed-end infrastructure pool,
raising 40 percent more than targeted from more than 60 pension-fund managers, insurance companies and institutions, including
Sun Life Financial Inc.

“We like the investment attributes in South America,” Sam
Pollock, chief executive officer of Brookfield’s infrastructure
group, said in an Oct. 30 telephone interview. Brazil’s
renewable-energy industry is “one we know well and in which we
can make future investments.”

The Toronto-based company, which has invested in
infrastructure for at least a century, will allocate 40 percent
of the Brookfield Infrastructure Fund II to projects in North
America. A portion of the remaining funds will be used for
hydroelectric power plants and wind farms in South American
countries including Brazil, Peru, Colombia and Chile.

Largest Economy

Brazil’s gross domestic product will expand 2.45 percent
this year and in 2014, according to the average estimate of 38
economists surveyed by Bloomberg. The largest economy in South
America recorded its slowest two-year pace of growth in more
than a decade in 2011 and 2012. Policy makers have raised the
country’s key interest rate more than any other country tracked
by Bloomberg this year as an annual inflation rate of 5.75
percent in mid-October undercuts consumer confidence and
threatens business spending.

Even with those headwinds, demand for energy investments
has ballooned. A record 929 power projects registered last month
to participate in a Dec. 13 auction for contracts to sell
electricity. Wind farms made up 47 percent of the projects, and
natural-gas plants 22 percent, according to energy-research
agency Empresa de Pesquisa Energetica. Other projects include
solar and hydro plants.

“As the economy grows, electricity demand grows, and the
companies need to supply that,” Hall said. “And these supply
companies need a bunch of capital. Brookfield and its partners
are providing that capital.”

Hydro Market

Electricity consumption in the country jumped 42 percent
between 2000 and 2010, according to the U.S. Energy Information
Administration.

Brazil “tends to be a hydroelectric market and that’s
where most of our focus has been,” Pollock said. The country is
“looking to broaden the load to be spread across different
technologies, not just hydro, so we’ve started to look at wind
in that market.”

Brookfield’s Brazilian unit is also in exclusive talks with
Vale SA, the world’s third-largest mining company, to buy about
26 percent of Vale’s VLI SA, a cargo logistics operator. Vale
owns railways, ports and terminals that span the country,
transporting commodities from wheat to steel.

“We’re currently looking at Vale’s logistics business in
Brazil, which is a large rail and port opportunity,” Pollock
said. Any infrastructure transaction Brookfield makes would be
for the new fund, he said. The fund is the largest
infrastructure-investment vehicle after Global Infrastructure
Partners, which raised $8.25 billion last year, according to
London-based research firm Preqin Ltd.

Rising Income

Brookfield’s net income rose to $802 million in the second
quarter, up 112 percent from a year earlier. Asset-management
fees, which the company charges clients to manage funds such as
the new one, rose 72 percent. The firm’s shares have gained more
than 100 percent in the past five years, outpacing the 47
percent advance for the 46-company Standard & Poor’s/TSX
Financials Index. Brookfield was little changed at C$41.69 at
10:24 a.m. today in Toronto.

“Once fully invested, the fund will increase Brookfield’s
annual third-party fees by over $50 million annually,” Michael
Goldberg, an analyst at Desjardins Securities Inc. in Toronto,
said in an Oct. 30 phone interview. “That’s a big increase. On
top of that, they get incentive fees. These are the numerical
impacts. The other impact is the increased profile that it gives
Brookfield as an asset manager.”

Brookfield’s Global Listed Infrastructure Income Fund, a
closed-end fund with total assets of $238 million, had a 23
percent return last year, compared with 19 percent for its
peers.

Two Acquisitions

Brookfield, which received a quarter of its revenue from
asset-management services last year, has already made two
purchases, worth $600 million, for its fund: Entergy Solutions
District Energy Ltd., a company that provides heating-and-cooling services to businesses in New Orleans and Houston, and
White Pine Hydro LLC, a portfolio of hydroelectric facilities in
Maine and New Hampshire.

Infrastructure assets may lure fewer investors, such as
Canada’s pension funds and insurers, as interest rates increase.
The high yield offered by infrastructure may not be as
attractive once other investments start offering similar
returns.

“What’s the demand for this type of product four or five
years from now, when interest rates have normalized?” said Hall
of Mawer Investments. “Is it still the same? That’s an open
question.”

Regulatory Changes

Investing in any emerging market also carries the risk of
the country nationalizing assets or changing regulations in way
that hurts companies, Hall said. Buying renewable-energy assets
in Brazil also has logistical challenges.

“With wind projects, you tend to have data that tends to
be spotty and the technology around turbines continues to
evolve,” Pollock said. “It’s been an industry that’s been
maturing and, whenever you go into new regions, it just takes
some time for people to get it right. This is a continuation of
our progress as an asset manager.”